The UK has been ranked the fifth best-prepared market in the world for the electric vehicle transition despite rising challenges around supply and regulation.

EY analysed the world’s top 20 markets for EV readiness based on factors related to supply, demand and regulation

EY’s latest EV Country Readiness Index analysed the world’s top 20 markets based on factors related to supply, demand and regulation.

It found China still ranked number one, while Norway remained second. The US climbed four places to third, and Sweden slipped one place into fourth.

The UK’s rankings for supply (7th to 8th) and regulation (3rd to 4th) both fell by one place year-on-year, but it continued to rank 6th for EV demand, helped by the impending 2030 ICE ban encouraging “an increasing number” of both businesses and consumers to go electric.

Despite the UK’s rankings falling in two of the three key criteria, the nation’s EV penetration – BEV and PHEV sales as a percentage of total light vehicle sales – is expected to rise to 26% in 2023, up from 21% last year and well above the average across all 20 markets (19%).

This figure however remains a long way behind the frontrunners Norway, who are forecast to see 81% EV penetration this year, with Sweden (53%) ranked second and Netherlands (35%) third.

Maria Bengtsson, EY’s UK electric vehicle lead, said that while it was encouraging that the UK remains one of the frontrunners in pursuit of an effective transition towards EV adoption, there was still scope for significant improvement.

“As the clear global leader according to the Index, China has demonstrated the impact that appropriate regulation along with a localised supply chain and robust infrastructure implementation can have. There are lessons to be learned from that for the UK market, and the onus will continue to be on OEMs and the Government to collaborate on this challenge going forward.”

Bengtsson also warned the lack of clarity on the zero emissions vehicle mandate due in 2024, along with uncertainty around plans and progress on the supply side, were particular challenges for the UK.

She also stressed that regulatory incentives have room for improvement, particularly when compared with legislation brought about in other competing markets – such as the Inflation Reduction Act in the US. This contributed to the country climbing four places into third within the Index’s rankings.

Top markets to extend dominance in EV supply

The research also illustrates the challenges the UK faces to become dominant in EV supply.

Some 55% of global EV production is expected to come from China in 2023, making it the global leader by far. The US is ranked second with an expected 11%, with Germany (10%) third. Meanwhile, the UK is expected to account for less than 1% of global EV production this year.

Positively, the UK is aiming to increase its battery production capacity to 41 gigawatt hours (GWh) by 2027, up significantly from 2GWh in 2022, enabling the nation to compete more meaningfully on a global scale.

Infrastructure is also a concern for the UK’s EV transition prospects. On the positive side, latest data indicates a 42% year-on-year rise in UK public charge points in August, up to 48,450 devices. But EY also says a lack of fast charging is a marked challenge for the UK’s EV transition prospects.

David Borland, EY UK & Ireland Automotive Leader, said: “Going forward, it will be critical for not only the number of EV chargers in the UK, but the location and speed of charging infrastructure, to be prioritised. While there are positives, there is a long way to go for the UK to compete with the world’s leading EV markets, particularly in relation to supply and regulation. Specifically, regulatory incentives and support have room for improvement if the UK is to be seen as a top destination for attracting Foreign Direct Investment in the EV space.”

Demand ranking holds firm but upfront costs still dissauding drivers

The UK is still ranked 6^th among the world’s leading markets for the EV transition in terms of demand, with 13 consecutive months of growth in new car registrations strongly supported by the increasing popularity of BEVs and PHEVs.

But projected EV sales for 2023 are below the average across the top 20 markets. And EY says the substantial upfront cost of EVs remains a stumbling block for some motorists, according to its latest Mobility Consumer Index. It found 36% of respondents said cost was a key concern.

However, the significance of this issue appears to be receding to an extent: based on the five top best-selling BEVs compared to their equivalent ICE models, BEVs are only around 10% more expensive than ICE vehicles in the UK market, providing another support to future demand.

This price parity is the second-best across the world’s top 20 markets, with the UK tied with Italy. China leads the way with BEVs only around 8% more expensive than equivalent ICE vehicles based on the same criteria.

High fuel prices and penalties on ICE vehicles have emerged as the key motivators for potential EV buyers in the UK. However, high charging costs and inadequate public charging infrastructure are among the top concerns deterring consumers from going electric.

UK EV sales are expected to grow by 36% year-on-year in 2023, which lags behind the average projected growth rate of 64% across the top 20 markets. This is however an increase from the UK’s 2022 EV sales growth (22.7%).

Regulatory ranking slips but remains high, as measures ramp up

Although the UK’s regulatory ranking fell from 3rd in 2022, the nation still ranked higher (4th) on regulation than both supply and demand according to EY’s latest EV Country Readiness Index, behind Norway (1st), China (2nd) and the US (3rd).

The UK is ramping up government and regulatory support, with plans to invest £1.6bn into the development of EV charging infrastructure. This will include £950m towards the Rapid Charging Fund (RCF) for the installation of DC chargers.

But the market does lag behind China, Germany and the US in terms of investment for EV and battery manufacturing. To help close that gap, the Government has earmarked £800m for investment in EV battery production, along with £211m of funding for battery research focused on cost reduction, energy enhancement and recyclability.

The UK government has also set out ambitions to achieve net zero emissions by 2050 as part of a 10-point plan for a green industrial revolution designed to create 250,000 jobs, backed by a £12bn investment package.

EY added: “This highlights the intention to drive forward an electric future, but as presented by the Index, continuous progress across all three variables of demand, supply and regulation will be required for the UK to achieve its objectives around decarbonising transport.”